In this group mentoring meeting, we cover the Passive Portfolio Layer and the VMA credit spread strategy (VMA review begins around minute 30).
(For Members Only, Please Do Not Distribute)
This strategy was submitted for the June 2019 4-Week Options Trading Strategy Challenge by Vincent Barone:
Long Name of the strategy: 10 GC ACVO PctEMADist
Andrew Falde’s unofficial nickname: VMA
Note: For easy reference, the URL for this page is formafinancial.com/vma
- DTE 180+ (but can be 175 for example if spreads are better)
- Put credit and Call credit spreads used
- Strikes nearest $600 credit and $200 debit (more credit preferred if there isn’t something at $600 exactly)
- Technical display for daily chart
- EMA’s – 10, 20 and 50
- Positions held
- Bullish momentum = 1 put spread
- Bearish momentum = 1 call spread
- Neutral = 1 call spread , 1 put spread
- When EMA’s line up bullish (10>20>50), sell 1 put spread
- Bullish Exits:
- Profit Target – close and open new put spread at 75% profit target of short strike credit received.
- Stop loss – close and open a new put spread at 100% loss of short strike credit received.
- When EMA’s don’t line up in order, enter 1 call spread and 1 put spread. If you already have a put or call spread on due to previous bullish/bearish stance, keep this on and add the other side. Each spread/side is managed separately.
- Neutral Exits:
- Profit Target – close and open new put/call spread at 75% profit target of short strike credit received.
- Stop loss – close and open a new put/call spread at 100% loss of short strike credit received.
- When EMA’s line up bearish (10<20<50), sell 1 call spread
- Bearish Exits:
- Profit Target – close and open a new call spread at 75% profit target of short strike credit received.
- Stop loss – close and open a new call spread at 100% loss of short strike credit received.
- For PctEMADist indicator (in conjunction with the above):
- When the PctEMADist indicator gets to 3.3, close current spread position and flip other way. If the signal then gets to over 4.65/hits stop then exit the new position and wait for next trade signal to occur. If the PctEMADist jumps past 3.3 or 4.65 to a higher number then just get out and wait for new signal or 3weeks, no flipping.
- After entering a flipped position and the system goes neutral, do not add other side but instead just keep the original position.
- If the profit target is reached on the new flipped position then exit and re-enter a new trade as normal ACVO rules.
- If the system goes in the direction of the flipped position then add but manage both separately.
- If it changes back to the original direction or doesn’t change states after 3 weeks then get out of flipped position and trade original ACVO system, ignoring above until the signal changes to another state.
- If indicator gets to 7.6+, close position and flip. This is in extreme trends and has historically been a good enough indicator although it has only triggered twice in the past 10 years. For this last rule, use same rules as above except only stop out or profit target (not if it hasn’t changed in 3 weeks.) If stopped out on the flip then trade ACVO as normal.
TOS Indicator (for convenience of calculation)
Input price = close;
Input Fast = 10;
Input Slow = 50;
def FastEMA = ExpAverage(price, Fast);
def SlowEMA = ExpAverage(price, Slow);
plot Diff = (AbsValue(FastEMA – SlowEMA)/price) * 100;